Exam 2 Study Guide
Online Students: Since Exam 1 was so technical with mathematical and graphing material, I wanted to help focus your attention on material  for Exam 2. This is not intended to be a complete summary of the material that will be tested. Chapter 2 is small enough that there should be no problems mastering the material from the chapter. Rather, I want to give you some idea as to the relative importance and detail of information that I expect you to understand.

I see the material broken down into 5 categories of information:
concepts and definitions; data about the U.S. economy; data about foreign economies; market failures and the role of government.

Concepts and Definitions

This includes the basic vocubulary as summarized in the margin notes and highlighted in the text.  For example,  GDP, GDP per capita,  economic growth, et cetera. But it also includes more general concepts like the changing mix of output, factor mobility, and the composition of GDP.

U.S. Data

I expect you to know and understand data that is specific to the U.S. economy, for example, it's relative size (GDP and GDP per capita), its average growth rate, relative size of its various output sectors.

Foreign Data

I expect you to know the relative comparisons of foreign countries' economies to the U.S. economy. For example, I want you to know the countries that are the major trading partners to the U.S. (both export and import). Be careful, the text reports individual countries as well as entire regions. It is not appropriate to compare entire regions to individual countries. I also expect  you to know the realtive sizes of major foreign economies as compared to the U.S. economy.

Market Failure & the Role of Government

Finally, I want you to understand that a private market cannot provide everything that an economy needs. The  private market  fails to provide  a range of essential  goods and services. It is this reason that  the government is required to play  some role in the economy. Areas of market failure include externalities, monopoly, inequality of opportunity. Areas that require government involvement simply for the market to function include establishing a legal and political framework, ensuring fair competition, protecting sectors that lack a balanced role in the market (consumers, labor, victims of pollution). I want you to know the degree of income inequality in the U.S. as reported in the text by income quintile.

Again, this summary is not intended to completely cover everything that will be on the exam. Rather, it is intended to indicate the relative degree and depth of understandin that I am expecting.